What's an Options Order Sweep?[ZT]

青影

A sweep is typically a large order broken up into a number of smaller orders that trades across multiple exchanges.

This actually helps you with better pricing.

If you purchased (SIZZLE Method Report) you’ll know that the service I use is able to detect sweeps vs. classifying them as smaller individual orders.

If it sounds confusing…I’ll show you an example.

On May 9, 2014, there was a sweep detected in PPO June $42.50 calls, a buyer came in and bought 901 options at $0.90 when the options where trading $0.60 bid at $0.90 ask.

So let’s assume there were 901 options being offered across the multiple exchanges, the buyer came in and bought all of the options offered at $0.90 at the time.

For example:

They bought 29 contracts from the ISE exchange, 235 contracts from the PHLX exchange, 17 contracts from the ARCA exchange, 288 contracts from the CBOE, some from the AMEX exchange…so on and so forth (in milliseconds). Since these occurred on different exchanges, each exchange must report the fill.

Now, if you were watching the time and sales of orders on your trading platform, you might think that these are smaller trades all occurring at the same time.

However, there are services out there that are able to detect these smaller orders as one large trade (that is split up across the various exchanges).

Let’s look at an option order ticket for another example,


Again, we are looking at the June $42.50 calls in PPO. Notice that the bid/ask spread is $0.75 bid at $1.00 ask. In addition, there are 1,111 contracts being bid for at $0.75, 372 contracts at the CBOE, 363 contracts at the PHLX, 265 contracts at the AMEX…so on and so forth.

There are 1,359 contracts offered across the various exchanges at $1.00. If someone decided to buy all 1,359 contracts at this price, they would have to sweep across the nine different exchanges which have offers out.

However, the time and sales would look like nine smaller orders. 699 contracts bought at the AMEX, 328 contracts bought at the PHLX, 164 contracts bought from the CBOE…so on and so forth.

That’s the technical answer. But a better question, what does it mean? Well, it’s clearly an aggressive order. The buyer is willing to pay the ask price and they are willing to scoop up a lot of option contracts.

Whenever I see calls being swept, that typically means some large trader is making an aggressively bullish bet. That doesn’t mean that I’ll chase the order, but I might look for creative ways to put on a bullish position, possibly selling puts or structuring a spread trade.